Announcement by Minister for Finance on Banking of 30 September 2010: Statements (Resumed)

Deputy Margaret Conlon

I welcome the opportunity to make a contribution on the banking crisis. This is not the first time I have spoken on the banking crisis that has taken us all by storm and rocked us to our very foundations.

Members on all sides of the House have been disgusted by the events which brought us to the famous night in September 2008 and the decisions subsequently taken not to bail our banks, bankers or developers, but to keep our economy functioning and our country running. I have made no secret of the fact that I deplore and condemn those people who engaged in reckless lending practices. I hold no court for any banker, builder or developer but I know they brought us to the brink. Of course, people are angry, and rightly so. I am angry myself. I am furious at what has happened. However, anger is not a solution. It is not an answer to the problems and will not get us anywhere. We can continue to bemoan what has happened and talk about mistakes that were made, who is to blame for them and who should have done this or that. However, that will not get us anywhere. We can look back in anger but we must move forward with hope and determination.

Mistakes were made on all sides of the House. I was not here during the good years, and there were many good years, but I remember reading speeches by Members of the Opposition at that time. The all contained calls for increased government spending and reduced taxes. No matter how much was spent or committed to projects and no matter by how much taxes were reduced, people on the opposite side of the House said it was not enough. They said the Government should have been spending more and cutting taxes by more. It is important to place that on the record.

We faced recession before. We had it in the 1970s and 1980s. Anyone who thinks this is the last time we will face a recession is mistaken. We will have recessions in the future because the economy is cyclical. An economic boom is followed by a recession. So the cycle goes, and it will happen again. We are dealing with a difficult economic situation and people who had jobs find they no longer have them. Households find their incomes are drastically reduced. People who have left college wonder if there is a future for them. I see pupils in the Gallery this morning. They are wondering what will happen to them. Will they have a job when they finish their education? These are the questions people are asking. If we work together in the national interest and put aside our differences, we will come through this difficulty and emerge as a better and stronger country.

When things were good we lost many of our values. People were so busy making money and so concerned with their own lives that they forgot about their neighbours and communities. We lost our sense of community spirit. In my own constituency I see a return to that. Communities are getting up and doing things for themselves because they see these times not as something big and bad, but as an opportunity to make things better for their communities.

I will speak for a few minutes about Anglo Irish Bank in plain simple terms. Winding down Anglo Irish Bank on that night in September 2008 was simply not an option. The bank held investments of €80 billion, a figure of huge magnitude. We used to speak about hundreds, thousands and millions but now we have moved on to billions. Those investments were owned by Irish pension funds, local authorities, small and medium sized enterprises and credit unions. It would have been irresponsible of the Government to let that money go. People were angry about what happened but one can only imagine the anger of the ordinary men and women of this country if the money vanished. I acknowledge the taxpayer will pay a high price but we must inject capital into these institutions if we are to prevent them from collapsing.

These injections of funds will add to our national debt but it is not fair to compare them with annual adjustments in the budget because doing so creates the false impression that savings made in the budget will be ploughed into the banks. The cost of resolving the problems of Anglo Irish Bank and Irish Nationwide is a once-off addition to the national debt. Typically, countries do not repay their national debts but instead pay annual interest repayments for an indefinite period. This recurring expenditure is the proper figure to compare to the annual budgetary adjustments.

The Central Bank carried out a detailed analysis of potential losses in our banks in coming years and the Department of Finance is working to reorganise the financial sector. Better regulation and organisation is necessary because banks can never again be allowed to behave as they did in the past.

I regret the day when the power to grant or refuse loans was taken away from the local bank managers, who knew their customers' income and liabilities and could accurately assess whether they would be able to repay their loans. They investigated the financial situation of prospective borrowers on an individual basis. That power was transferred to faceless people in a head office somewhere in the ether. These people knew nothing and cared even less about the individuals concerned or their financial histories. They did not have the best interests of their customers at heart because they were more interested in being rewarded for increasing their bank's loan books.

We now have an opportunity to introduce reform but this must be done in a constructive and positive manner. I am fed up with the constantly negative portrayal of this country in the media. From the time one switches on the radio at 7 a.m. until one turns off the television at midnight one does not hear or see a single positive story, with the exception of the historic rescue of the Chilean miners. It is time that we be positive in focusing on the future.

There is broad agreement on the necessity of cutting our budget deficit to meet the EU target of 3% by 2014. We face the challenge of doing this in a way that minimises the pain for the vulnerable and marginalised. We have to consider taxation, public service provision and unemployment figures. We must give people hope that they will be able to return to employment and thereby make a valuable contribution. We must investigate how savings can be achieved through the Croke Park deal. The reality is that we are spending €5 for every €3 taken in. One could not keep one's house going indefinitely under that financial arrangement.

I welcome that the Taoiseach has reiterated his desire to engage the Opposition parties in constructive talks on the four year budgetary plan and that his proposal has been accepted by Deputies Kenny and Gilmore. I think we all agree this is not a time for business or politics as usual. It is important that all sensible and viable proposals are examined in detail. It is most helpful that officials from the Department of Finance have briefed Opposition Deputies on our financial situation. We must leave the bickering to one side and demonstrate that we are putting the best interest of the country and our constituents first. People are not impressed by the negativity that currently exists and, no more than anger, petty bickering and squabbling will not provide a solution. As politicians, we need to put our heads together to give hope to the people we represent.

The 450,000 people who are unemployed will not have hope if we cannot make credit flow into the economy and for this we need a healthy functioning banking system. Any citizen who has money on deposit has a legitimate expectation that his or her deposit will be safe and accessible. If we had not put the bank guarantee system in place, many ordinary people would have lost their hard earned savings.

Despite the difficulties small and medium sized enterprises face in accessing credit, they are making a huge contribution to our economy in difficult circumstances by keeping people at work, producing goods and services and contributing to export growth. To survive, these businesses need credit and working capital. I do not advocate a return to reckless lending practices but if a business had a good record and a viable future, it should be given the tools it needs, including credit, to remain in operation.

The announcement of the bill for Anglo Irish Bank has brought us certainty because we now know the nature of the problems we face. The next step is dealing with these problems.

I commend the Minister for Finance on the way in which he has been dealing with issues pertaining to his Department and to banking. He has been clear, open and honest in providing information. He has had a very difficult job but he has discharged his duties in an admirable manner.

I welcome the comment from Standard & Poor's, which stated this week that concerns about our fiscal and political risks have been exaggerated. It even predicts Ireland will recover from this recession faster than other peripheral European countries. This little bit of positivity that should be highlighted as it is important. It is the kind of positive news that is needed.

We have faced up to the reality of what the bank guarantee will cost. We are preparing the plan to get our finances in order. We are working with Opposition parties, whose viable, credible and workable proposals will be given due consideration. I am not interested in going back over the same problem time and again. I am sick, sore and tired listening to the mantra that we bailed out the banks, builders and developers. Let me say for what I hope will be the last time in this House that we did not bail out any banker, builder or developer. We bailed out and assisted our economy to keep it functioning, to provide jobs, assist businesses and protect the deposits of those who have put their hard-earned money into deposit accounts. I am not interested in playing the blame game and am only interested in the solution.

There is some light at the end of a long, dark tunnel. There are still difficult and painful decisions to be made. I am not under any illusion in that regard. Although the budget will be extremely difficult, if we work together in a spirit of co-operation, we can make it work.

Deputy Deirdre Clune

I wish to share my time with Deputy Creighton.

An Ceann Comhairle

Is that agreed? Agreed.

Deputy Deirdre Clune

This debate on banking is being held two weeks after the renewal of the guarantee on Thursday, 30 September. Although the debate looks back to that date, a lot has happened since. The stark problem facing the nation in the budget in December concerns how we can bridge the €20 billion gap between income and expenditure. It is a challenge for all parties. Fine Gael will not be found wanting in contributing to that debate. We welcome the letter from the Taoiseach yesterday and that from the leader of the Green Party, Deputy John Gormley.

Deputy Conlon said Fianna Fáil would welcome input from all parties across the House. I hope that is the case. The debate on the Order of Business this morning on the information that will be available to Opposition parties throws up some serious questions. We need consensus on our financial position. Fine Gael has said it does not know the figures. The IMF mentioned a figure of €10.7 billion. I do not know whether that is the figure the Government is working with. As a nation, we should commit to a deficit target of below 3% of GDP by 2014. This should be front loaded.

Full information will have to be provided to all parties. The Tánaiste said this morning that the figures would not be published until budget time. The proposed expenditure of Departments will not be available until the day of the budget. Unless the Government knows what it has to spend, how can the Opposition propose options? The questions that have been raised seriously concern me and others on this side of the House. We need full information. If it is to be a case of business as usual, and we do not have the full figures, what is Fine Gael being asked to participate in? Will it be the same kind of business as last year? I hope not.

The banking policy of the Government has failed and that is why we are here today. We are facing a scenario in which our ratio of debt to GDP will peak at 32% this year. This is unheard of and has consequences for every man, woman and child in the country.

The bank guarantee in September 2008 represented a momentous occasion, in addition to Thursday, 30 September 2010. The banking inquiry of Professor Patrick Honohan, which covered the period 2003 to the end of 2008, which period commenced with the establishment of the Financial Regulator, points to excessive weaknesses in Irish banks. These were exposed by the collapse of the global markets in May 2007. However, when compared to the imbalances that had been building up during the previous decade, we note we had a home-grown problem. It is not good enough to blame global crises, as some are so good at doing. We now know well the reason for Ireland's problems. There was over-reliance on the construction sector for employment, for providing income to the State coffers and for activity in banks.

The banks availed of cheap money from international markets and flooded the markets at home. When the money dried up, the whole edifice came crashing down like a pack of cards. It is not good enough to blame the international markets as we should have known better. We as a nation should blame ourselves and seek to determine what went wrong and how we can rectify the problem.

Income from the property sector was never going to be available forever. Warning signs were evident but they were not heeded. Warnings came from Opposition parties and from economists outside the House. It was irresponsible to expand the public sector and services on the back of funding that would eventually dry up. It was unsustainable. There were enormous increases in the education and health sectors and a growth in quangos.

When one looks back, one must ask what kind of thinking prevailed at the time in question. Prudent economic management ordains that, during a boom such as ours, we should have invested in productive infrastructure. By this, I mean infrastructure associated with electricity supply, broadband, telecommunications and transport. Such investment did not happen.

The OECD points out that Ireland continually fails abysmally in international comparisons. The quality of infrastructure is definitely linked to economic growth. It is vital to competitiveness. In the World Economic Forum's competitiveness report, Ireland is ranked 65th, near Hungary. All the figures point to Ireland's low rate of investment in productive infrastructure. It plummeted between 2001 and 2009. We will now pay the price for this because we badly need quality infrastructure to ensure employment growth.

Construction output peaked at €38 billion in 2007. However, less than 20% of this pertained to public infrastructure. Some 60% of the output between 2000 and 2007 was invested in private residential apartments and non-residential sector developments. I do not know exactly how much those assets' values have dropped; it is a question of the length of a piece of string. While we had a boom in the construction sector, only 20% of the output resulted in public infrastructure. Prudent management did not exist. The infrastructure that was needed to support enterprise and plan for our future was not put in place. Instead, we had a party and a great boom. Now we are experiencing a hangover.

During the years in question, did we have light regulation, heavy regulation or no regulation of the banking sector? Was there ever a fear of a regulator's visit to any of the banks? Was Mr. Patrick Neary's office even a mild annoyance to the banking sector? I believe not. From 2003 onwards, the Financial Regulator was just not an issue for the banks.

Mr. Honohan states in his report that it is clear that a major failure, in terms of bank regulation and the maintenance of financial stability, has occurred. The report also identified three areas to which we can point in this regard, namely, failure of supervision in individual institutions, failure in terms of approach to stability policy and failure to undertake decisive and remedial investigation. Investigations in this regard are continuing. We are awaiting another report on the ability of the Department of Finance to play its part in terms of whether it was fit for purpose, had the correct information available to it and had the professionals needed to understand what the markets were doing and the influence these markets would have on a country like Ireland, which has a small open economy whose banks were dependent on international funding.

The Central Bank Strategic Plan 2010-2012 provides some comfort in terms of its putting in place the structures that are needed. It outlines how a new model of regulation is to be implemented. This must be underpinned by a credible threat of enforcement. Issues such as the need for greater enhanced assessment of financial stability, which is a much broader and deeper level of analysis, and careful and ongoing management of the liquidity to support our domestic banks are also dealt with in this plan. The plan recognises the need for the Central Bank to promote authoritative advice to the Government, now more important than ever.

Mr. Honohan and Mr. Elderfield are providing confidence in terms of their approach to the job they are doing. Their job is a difficult one. While Mr. Honohan and Mr. Elderfield are important appointees for the country, they are also important in terms of the strong message they are sending to the international markets, namely, that we recognise where we went wrong and are putting in place structures to ensure this never happens again. This type of confidence is essential.

Deputy Lucinda Creighton

We are speaking on this topic two weeks after the Minister for Finance made his announcement. This issue has been in a sense discussed to death in the media and in this House. We have had many debates on the banking crisis during the past two years. There is a legitimate sense of frustration on this side of the House that some, in fact most, of the warnings flagged by spokespeople on the Opposition benches were largely ignored by the Government. While we have heard some platitudes in regard to constructive engagement by all parties in finding solutions to the general economic crisis, the solutions proffered by us are largely ignored.

Deputy Conlon's lament that we should not look back but should simply look forward is simplistic. It would be an indictment of this House were we not to reflect on the decisions taken, the absence of regulation and the mistakes made. It is imperative we do this. It is also imperative this is done by way of independent investigation. Sadly, a comprehensive review of political decision making and regulatory issues does not appear to be on the cards, which is unfortunate.

As we approached the introduction in this House of the NAMA legislation this time last year we were being told by way of strong and convincing narrative in the national media, by almost all commentators and a significant cohort of economic experts, political correspondents and so on, that NAMA was the only show in town and the only way forward and that the Government's approach to the banking crisis was essentially the only option. This has been proven conclusively to be incorrect. We have seen, in particular during the past three or four months, a slow but eventual realisation that the points consistently put forward by our spokespeople on finance since the introduction of the bank guarantee scheme in 2008, that the concept of total and utter exposure of taxpayers to what in effect are the liabilities of risk takers, was and is unjust, inequitable and not propitious. While this was dismissed in a somewhat arrogant manner by Ministers and others it has proven to be correct.

In most other jurisdictions bondholders who took risks in the full knowledge they were taking them have at least suffered some consequences. In no other jurisdiction did a Government adopt the approach of signing blank cheques for defunct financial institutions, as happened here. The Minister for Finance, Deputy Lenihan said at the time — I am open to correction as it may have been the Taoiseach who said this — that Government policy was to write whatever cheques were necessary to bail out all banks, including delinquent banks like Anglo Irish Bank and Irish Nationwide Building Society. This was unfair, not prudent, not in the national interest and could not in any way be perceived or understood to be in the interests of taxpayers.

It is important and incumbent upon us as public representatives to remember that we are elected to this House not to represent bankers or international bondholders and risk takers but to represent and protect the interests of taxpayers and to spend hard earned taxpayers' moneys wisely and prudently in the national interest and, more important, in the interests of those taxpayers. This has not, by any stretch of the imagination, been our approach to the banking crisis.

This debate must be had in the context of the last two budgets, which have been punitive, and the forthcoming budget which is likely to be even more punitive. People are legitimately angry and frustrated and they feel helpless. Our citizens no longer believe they have any control over how their taxes are spent or in regard to decision making at Government level. People are fully prepared to take the hit and to play their part in trying to rectify the abysmal state of the public finances.

The spirit of co-operation we have witnessed during the past 18 months is unrivalled in other countries. However, they are only willing to do this on the basis of the approach taken being fair. It is difficult for our citizens to take hits in terms of pay cuts, income levies and so on given what is happening in regard to Anglo Irish Bank, Irish Nationwide Building Society, Allied Irish Bank and Bank of Ireland. It is difficult for citizens to contemplate what is happening in respect of Anglo Irish Bank, AIB, Irish Nationwide and even Bank of Ireland, particularly when they are being asked to take hits in the context of public pay, increased income tax, the imposition of income levies, etc., and in view of the fact that no sanctions have been imposed with regard to failures in regulation. Sanctions have not been imposed on any banker and they certainly have not been imposed on any Minister. It is highly unlikely that they will ever be imposed on Ministers.

Sanctions have not been imposed on anyone who participated in the grand conspiracy to trade recklessly in the banking and construction sectors. Likewise, there have been no sanctions in respect of flawed decision-making on the part of or bad policies adopted by poor Ministers whose judgment would not be considered appropriate in the context of running a parish council not to mention operating complex banking regulatory systems. Individual citizens who have been doing their jobs, paying their taxes and minding their own business are extremely angry with regard to the pain being inflicted on them, particularly when those who were responsible for the economic catastrophe that has befallen the country are getting away scot free.

Those are the main points I wish to make. It is important that we should reflect on the failures that have brought us to our current position. We must also reflect on the fact that the public will not be content to take much more of what is being handed out if sanctions are not imposed on those responsible for causing our current difficulties.

Over 75% of the money used to recapitalise the banks has been put into Anglo Irish Bank and Irish Nationwide. As already stated, these are essentially dysfunctional and defunct financial institutions which will never lend money again. The original priority, as stated by Government Ministers and, in particular, by the Minister for Finance, ad nauseam, for recapitalising the banks was to free up the flow of credit to SMEs. That was the logic which underpinned many of the decisions — including those relating to the bank guarantee scheme and the recapitalisation programme — made in the past 18 months. Most of that money is being put into banks that will never again be in a position to lend. In such circumstances, serious consideration should be given to accelerating the wind-down process in respect of Anglo Irish Bank. That institution should be wound down and we should begin to concentrate of restoring the balance sheets of Allied Irish Banks plc and Bank of Ireland to health. The latter institutions are of systemic importance while the other banks do not really matter in the context of the future of the economy. The Government should dispose of those which are in trouble.

There is a great deal more to be said on this topic. I do not doubt that similar debates in respect of it will be held in the near future. The bank guarantee is going to have to be extended in the new year. It would have been for more honest if the Government had acknowledged that in the first instance rather than extending the guarantee for a period of three to four months.

Deputy Pat Rabbitte

Black Thursday, and all that went before it, threatens to undermine Ireland's economic sovereignty. In 1997, a Fianna Fáil-led Government inherited an economy that was in pristine condition. Some 13 years later, a Fianna Fáil-led Government is pleading for bipartisan co-operation in order to keep the IMF wolf from the door. What has happened in this country represents a scale of collapse not experienced by any other western democracy.

The Labour Party will make common cause with the Government in seeking to ensure that it will not be necessary to make application to the European financial stabilisation fund. There is a definite prospect that if this country is forced to seek external assistance, it will come with very severe strings attached. Ceding economic sovereignty is not in the interests of our people. The Labour Party consented to the parameters agreed — prior to Black Thursday — with the European Commission, including last year's budgetary provision to take €4 billion out of the public finances. We committed to making savings of a further €3 billion in the forthcoming budget. There is no precedent for a similar gesture on the part of Fianna Fáil on any matter of policy when in opposition. However, the goalposts have changed again. The nightmare cost of the bank bailout has placed additional pressure on the Government and exposed how vulnerable we are to outside intervention.

Members of the public are punch drunk and are trying to figure out how the country should find itself in this position. How did our Government allow this happen? Why did the Government, in light of the advice available to it, make the decision it made on the night of 29 September 2008? Who advised the Government to give a blanket guarantee? Why did the Government make no intervention between the collapse of Northern Rock and 29 September 2008, a period of more than one year? Why did the Government take no action after the collapse in the value of Anglo Irish Bank shares six months prior to 29 September 2008? How is it that the Government could still claim after the collapse that there was no solvency problem in the Irish banks? Why have the figures that have been drip fed to us by Government since the collapse invariably been wrong? These figures have not just been wrong, they have been wrong by a mile? Why did it take so long to drag the true financial picture — if it is the final picture — from the banks? Why have the banks on the neighbouring island returned to profitability, one by one, while our banks remain paralysed?

A journalist who appeared on a programme late last night complained about my party leader raising a question last week with regard to the solvency of the banks. The journalist in question stated that this was an old story. It is not an old story. My party leader's question was posed in the immediate aftermath of the "Freefall" programme, which was broadcast on RTE and which highlighted the fact that representatives from Anglo Irish Bank had approached Bank of Ireland and Allied Irish Banks plc confessing that their institution was insolvent and requesting that one or the other take it over. The question Deputy Gilmore put to the Taoiseach was both timely and necessary, particularly in the context of establishing whether the Government knew Anglo Irish Bank was insolvent.

The entire purpose of NAMA was to strip out the toxic loans, recapitalise the banks and restart the flow of credit to business and households. Two years on, this has not happened. I was approached yesterday by representatives from a company based in the United States which had a request for €90,000 in credit to allow it to establish a facility here turned down by one of the main banks. I have passed the information relating to the case on to the Minister.

The contributions to this debate and to that relating to the extension of the ELG scheme from Fianna Fáil Members have been characterised by two themes: first, attack the Labour Party's refusal to give the blanket guarantee a blank cheque; and, second, take shelter behind the new Governor of the Central Bank, the first non-Fianna Fáil public appointee in 13 years. If Fianna Fáil is so insistent on the canonisation of Professor Patrick Honohan, why did it not appoint him Governor in 2001? It is likely that if Professor Honohan had been appointed in 2001, the appalling dereliction of duty that contributed to the calamity that has befallen us would have been largely avoided. Unfortunately, Professor Honohan's sagacity was only recognised in hindsight. Why was he not consulted after the fall of Northern Rock and before the fateful night of 29 September 2008?

Fianna Fáil hangs on for dear life to misrepresenting the Honohan report. All the Fianna Fáil BlackBerrys have been programmed to read "The Honohan Report endorses the blanket guarantee". Of course, it did nothing of the kind. The Honohan report concluded that by 29 September 2008, some form of guarantee was inevitable. No one disputes that by that fateful night, some form of guarantee was necessary. The question is what happened between the fall of Northern Rock and 29 September 2008, a period of more than one year?

What Professor Honohan states in his report is remarkably blunt: "No other country had introduced a blanket, system-wide guarantee". We have been told by Fianna Fáil speakers in this House there are 43 other countries with a blanket guarantee like ours.

Deputy Peter Power

The Deputy neglected to say that he recommended an extensive guarantee.

Deputy Pat Rabbitte

As the Honohan report makes crystal clear, early on a policy decision was made not to allow any bank, derelict or otherwise, to fail. The report states:

The "no failure" policy also took the question of optimal loss-sharing off the table. In contrast to most of the interventions by other countries, in which more or less complicated risk-sharing mechanisms of one sort or another were introduced, the blanket cover offered by the Irish guarantee pre-judged that all losses in any bank becoming insolvent during the guarantee period — beyond those absorbed by some of the providers of capital — would fall on the State. Given the "no failure" policy, a guarantee with its costs were inevitable.

That is the critical point, given the no-failure policy, that was the logic of where we were by 29 September.

Deputy Peter Power

The Deputy's party voted against it.

Deputy Pat Rabbitte

We voted against the blanket guarantee.

Deputy Peter Power

An extensive guarantee.

Deputy Pat Rabbitte

I am surprised at the speed with which the Minister of State, Deputy Peter Power, has caught up with the facility of his one-time senior Minister in the constituency to bend the truth. The facts are we opposed the blanket guarantee and Mr. Honohan is immensely critical, for a serving Governor, of the wisdom of how that guarantee was drawn, and the inaction and dereliction of duty which preceded the night of 29 September.

If a Minister for Finance had descended from Mars on 29 September 2008, he may well have had no choice but to do what Deputy Brian Lenihan did if we leave out matters such as the inclusion of dated subordinated debt, which he should not have done. The Minister for Finance did not descend from Mars on 29 September that year so the question is what happened since people on the streets of this city were seeking to withdraw money from Northern Rock more than 12 months earlier. No action was taken by the Minister for Finance's predecessor, Deputy Brian Cowen, and that put us into that position on 28 September.

Deputy Peter Power

The Deputy neglected to say that a comprehensive guarantee was recommended.

An Leas-Cheann Comhairle

Deputy Rabbitte, without interruption.

Deputy Pat Rabbitte

The Honohan report continues:

The scope of the Irish guarantee was exceptionally broad. Not only did it cover all deposits, including corporate and even inter-bank deposits, as well as certain asset-backed deposits and senior debt, it also included ... certain subordinated debt.

It continues to indicate "The inclusion of subordinated debt in the guarantee is not easy to defend against criticism."

It is difficult to imagine how a serving Central Bank Governor could be more critical. It is cynical in the extreme for Government speakers who know better to attempt to misrepresent the Honohan report. One Member, the former Taoiseach, Deputy Bertie Ahern, even still clings publicly to the explanation that the crash is due to the Lehman Brothers collapse — an explanation that gets short shrift in the Honohan report. Professor Honohan notes that "a detailed review of the ensuing discussions is hampered by the absence of an extensive written record of what transpired." We know that to be the case from the Committee of Public Accounts papers, as there are significant gaps and much of what transpired is not recorded at all.

As a result we do not know to this day who advised the Taoiseach and the Finance Minister on that fateful night of 29 September 2008 to give a blanket guarantee. We know, as the Honohan report records, that "the note prepared the previous weekend by the Merrill Lynch advisers had explicitly envisaged exclusion of dated subordinated debt from the coverage". We know from the Committee of Public Accounts papers that Merrill Lynch did not recommend a blanket guarantee. Further, it seems to be the case that the officials in the Department of Finance did not recommend a blanket guarantee. The Taoiseach told the House that any cost attaching to the blanket guarantee would be borne by the sector but Merrill Lynch had pointed out — and it is a point corroborated in the Honohan report — that the cost of borrowing "would likely be affected by the contingent liability, estimated at over €400 billion, associated with the guarantee".

Most pertinently, the Honohan report records on page 119 that "as the discussions regarding procedures for crisis containment started to unfold, early on a clear consensus view emerged that no Irish Bank should be allowed fail". The report goes on to instance that there is no such prescription in the textbook. It states: "This strong view departed from the textbook view that only systemically important institutions should be candidates for such protective treatment". This decision that no bank could fail was the major influence on the decision taken on the fateful night on 29 September 2008.

In ease of the Government, may I put on the record Professor Honohan's conclusion. He states: "Given the position the authorities found themselves in on that night it is understandable why, given the extreme time pressures, all efforts were devoted to finding an immediate way to save the Irish banking system from looming disaster." I said at the time in this House that the Minister for Finance was put in a position analogous to the bomb disposal expert; he had a blue wire and a red wire and he could not afford to cut the wrong one.

The question remains of why the Minister for Finance found himself in that position. Why did the regulatory and administrative systems allow the Minister for Finance to be placed there? Why did his predecessor allow Deputy Lenihan to be put in that position? What was going on between the collapse of Northern Rock some 12 months earlier and 29 September 2008? What was going on between the March share price collapse and September date? Even allowing for regulatory capture, how could the Minister for Finance of the day allow such a potentially explosive position to build up?

According to the Honohan report, "There is no doubt that from mid 2007 onwards Ireland increasingly faced a potentially serious financial crisis." It is an injustice to the Governor of the Central Bank, who has been hauled in in extremis to try to restore this country’s reputation internationally, to be so misrepresented, along with his report, in this House. He makes the point in the report that as far back as the 2004 Financial Stability Report, the following position obtained. That report notes: “The risk of a substantial fall in residential property prices ... is the risk that poses the greatest potential threat to the health of the financial system.” That was in 2004, and the Minister for Finance was being warned about the threat posed to the health of the financial system. Such warnings were ignored. What action was taken? We continued the tax incentives, opened new ones and extended others. When such a warning did not immediately materialise, it induced a complacency that can only be equated with grave dereliction of duty.

The examination by the Committee of Public Accounts shows clearly that towards the end not even the Department of Finance believed the story that we were dealing only with a liquidity crisis. Yet, between the failure of Northern Rock and the fateful night of 29 September 2008, the then Minister for Finance and later Taoiseach took no effective action. He failed to send anyone into the banks to stress-test the veracity of their assertions. Twenty years from now historians and economists will still be attempting to measure the sheer scale of that dereliction of duty. Deputy Seán Power is correct: the Taoiseach is haunted by his knowledge of the responsibility he bears for that dereliction of duty.

A generation of our people will pay the price for this. It is not yet clear if our economic sovereignty will survive the consequences. Now the talk is of consensus, shared analysis and mock humility. The analysis is in the Honohan report. In no other country in the world would the same politicians be still in charge. There can be no recovery until they are gone.

In 1997, Fianna Fáil and its Progressive Democrats allies inherited an economy in surplus. Twelve years later the economy is bust, our society broken. For a dozen years, those at the top of Fianna Fáil lived high on the hog because they thought they were worth it — Deputies Cowen, Martin, Dermot Ahern, Dempsey, Ó Cuív, O'Donoghue and O'Dea. Today their reputations are in shatters, their legacy turned to dust. Some of them are so delusional they will fight their seats again while others will slink away into obscurity. The damage they have done will be reviled wherever green is worn.

Obscurity would be a fitting end when compared to the unseemly antics of the man who presided over them. To end up in a Rupert Murdoch cupboard is the final insult to a people who gave him a lot of rope. Members may remember the note scribbled to the then Taoiseach, Deputy Bertie Ahern, before the 2002 general election by Fianna Fáil adviser Marty Whelan: "I think our friends in the News of the World still like us, Taoiseach. I suggest you drop them a thank you note.” With O’Reilly and Murdoch supporting him, he thought he was unbeatable. Indeed, he was. Now, it is payback time with the former leader of the republican party ending up playing hide-and-seek in a television advertisement for a British tabloid. One could not make it up.

There can be no recovery until they are gone. To hell with phoney consensus. We need a fresh start. We need a new Government with a mandate, not some behind-closed doors formula for paralysis.

Deputy Peter Power

I am glad to hear a fine articulation of the Labour Party's policy on consensus.

An Leas-Cheann Comhairle

I call Deputy Crawford. The Minister of State will have an opportunity to reply later.

Deputy Seymour Crawford

I thank the Leas-Cheann Comhairle for his support.

An Leas-Cheann Comhairle

It is unlimited support.

Deputy Seymour Crawford

I thank Deputy Rabbitte for an informative and in-depth statement on Black Thursday. That was a day none of us with a fair number of years in this House will ever forget. It was a dark day for the people. While many of us knew and understood what was coming, many ordinary people believed some newspaper reports that the economy had turned the corner and there was some hope. Black Thursday, however, ensured that not just the next generation, but the following generation will pay for the Government's economic mismanagement.

I accept international factors played a part in the current economic crisis. It is plain, however, that much of what happened in this country was as a direct result of what happened in the Fianna Fáil Galway races tent between builders, bankers and former regulators. They were all in it together.

When one looks back at what was allowed happen in the past ten years, it did not make sense building 90,000 housing units a year for a population of 4.5 million. In the Cavan-Monaghan constituency I drew attention to how many units were built while no jobs were created. It never added up. At the time, we were told that, with the better roads, people could commute to work in Dublin. Special tax relief for house construction in the Shannon basin, which covered part of my constituency up to Butlersbridge, allowed people to build houses simply because it was a tax benefit.

Unfortunately, few questioned what the outcome of such development would be. Those that did were told in no uncertain terms by the then Taoiseach, Deputy Bertie Ahern, to go away and commit suicide. That is the background to this debate.

Fine Gael, at all times, has put the country first. Most Members will recall the Tallaght strategy when the country was on its knees. We put it first then. When the Taoiseach asked the Fine Gael leader, Deputy Kenny, to back the bank guarantee, he did so accepting the Taoiseach's word on the state of the banks. Unfortunately, we now know much more important and revealing information about the true state of the banks was not made available to Fine Gael then.

I recall during the BSE crisis sitting in the benches behind the then Minister for Agriculture, Food and Forestry, Ivan Yates. He was doing his damnedest to save this nation from a major disaster. All the Fianna Fáil Members could do was introduce a vote of no confidence in him, a man who had been working from seven in the morning to 12 at night and who had the support of the farming organisations which recognised the excellent job he was doing. I find it hard to take lectures from the Members opposite telling us it is our duty now to bend over backwards for this Government and blindly back its resolution to this economic crisis.

Fine Gael is committed to work with the Government to find out how bad the state of economy really is, but it has another thing coming to it if it thinks we will back it all the way in the decisions it will have to make. Fine Gael did not cause this problem. Over the past number of budgets, Deputy Richard Bruton warned much of this was coming but was ignored. His statement and that of our party leader, Deputy Kenny, on the different agreements were also ignored. Last but by no means least, when they put forward alternatives to the banking problem they were laughed at and told they did not understand what was happening. I can assure the House that they did understand what was happening. They put forward proposals that would have saved this nation billions of euro but instead we were walked into a situation where two banks that are absolutely useless to the future of this country, namely, Anglo Irish Bank and Irish Nationwide, were bailed out to the tune of at least €40 billion. Imagine what that money would have done for job creation and making sure people could return to work.

I am not saying Fine Gael's proposals would have got us out of the situation for nothing or that they would have saved €40 billion, but the creation of a bad bank and a good bank would have decreased the costs. We now know that NAMA will not be a profitable organisation and another €40 billion has possibly gone down the tubes. It will cost anywhere up to €100 billion to sort out the banking situation, which is equivalent to three years' worth of tax receipts. We have a major problem on our hands.

Only this week we have had the Minister, Deputy Gormley, and then, after quite a lot of indecision, the Taoiseach, begging Opposition parties to cover their backs for the mess they have created. Others advise that we should all work together in the national interest because they do not want to accept responsibility for their decisions. Working together is something of which we are proud, having done so in the past. We will not work together to give a blank cheque.

Anglo Irish Bank and Irish Nationwide are now defunct and it is only a matter of time before they are wound down. In my area, we also have the wind down of ACC, National Irish Bank and Halifax. The banks available to us to create jobs and retain regional trade are Bank of Ireland, AIB, Ulster Bank, Irish Permanent and one or two other smaller banks. It is absolutely essential that these banks are forced to give credit. They have been underwritten by the taxpayers of the State through Government decisions. Yet, people are experiencing difficulties in getting their needs looked after. I make no apology for saying that because I know it first hand.

Some of the banks are claiming they are giving loans to people but in many cases they are changing working capital or overdraft into longer term loans to help their banking structures. Small retail businesses are under pressure. Shops are closing which means that no rates will be paid to local authorities and there is a knock-on effect in terms of jobs being lost. We need to make finance available to the banks. Deputy Bruton's proposal would have provided money for such a purpose and guaranteed it could not be used to restructure banks.

If the Government is looking for consensus it must accept worthwhile proposals from the Opposition and not laugh at and ignore them. When one reads a story in a local newspaper about a man or a woman who has not paid a small debt and is heading to jail, one has to ask what has happened to the chairmen and chief executives of banks and institutions. How are they walking free and enjoying holidays in their homes abroad? What sort of law is there in this country? There is one law for the ordinary man or woman and a different one for those with white collars. This is one of the issues which is annoying a lot of people.

As I mentioned earlier, there is a real problem with people who are under pressure and suicide rates have increased. The road safety campaign has paid off significantly. We need to ensure those who are under pressure and suffering from depression have access to treatment and can get help because such services are currently being cut off.

My party leader, Deputy Kenny, and Deputies Bruton and Noonan are putting forward positive proposals to ensure this country can get back on its feet. The one issue above all else which we must address is job creation. Tomorrow I will attend a debate on job creation organised by Monaghan Chamber of Commerce. It is desperately trying to give hope; we are not giving hope to people. It is a disaster that as a result of our lack of banking structures young people are being forced to leave the country. If they are left outside the country long enough they will stay there. As taxpayers we have paid for their education and some other country will benefit. That is not good enough.

We not only need to deal with the banking crisis here but we need to put in place genuine structures to ensure people who want to take up employment in this country get the opportunity to do so. Only yesterday I became aware of a young person who was eligible for a job in a local community but it was found, through some technicality, that the person concerned was not claiming social welfare for a long enough period. In another case a person was too highly educated for a job. Where do we go? Every technicality is being used to stop people who want to work from doing so.

We need to take a two track approach to this issue. We need to get our banking structures correct but not at any cost. We need to ensure that the people who gambled with money in this country take responsibility for their actions. We have to deal with the matter fairly. We need to try to get some of those who are on social welfare today back into employment, especially young well-educated people who would be better off working for nothing in firms and allowed to claim social welfare rather than allowing them to rot on the side of the street. We need to come up with new thinking and a new approach to ensure young people do not suddenly become long-term unemployed and unemployable.

We have too much to offer in this country. There are opportunities. I know some firms that have the money are increasing output in manufacturing and other industries, which shows that if others that are less fortunate and not as well-established could get the finance they could do the same. The opportunities are there. One company beside my home is exporting to 55 countries and is keeping people in work, which is vital. I know of others who are struggling and who cannot get the money to finance new projects.

We have very well educated young people but we are not giving them hope or leadership. We are making out that this country has no hope for the future. I came through extremely difficult personal times during the 1980s. At that time, we paid 23% interest. Interest is still relatively low if people could only get the money to either stay in or increase their business. This would be one of the best ways forward.

I look with awe and fright at what is happening in my constituency with Quinn Direct and the Quinn Group. At this late stage, I beg the Government to ensure that every possible help is given to ensure these jobs are maintained in these areas. There are ways and means by which the Government can do this within the law and within the structures. The Government owns Anglo Irish Bank at present and Quinn Direct is involved in this, or at least its personnel are. It is not too late to come up with a solution to this issue. People have put forward with one which can guarantee the best of both worlds, whereby Quinn Group workers can be retained in the main and the taxpayer would not have to pay for the €2.8 billion of personal debt. I urge that every way be looked at to ensure that the best resolution is found.

It might be very easy to sell off the insurance company for €1 and state we have no more responsibility for it. However, we must remember that if this is done the chances of those jobs being retained in Cavan and surrounding counties are very small. It may also have implications for the greater Quinn Group structure. I do not contend that the Quinn family did not make major mistakes. However, when this situation is compared to that of Anglo Irish Bank and Irish Nationwide and what this is costing the Irish nation in tax then it has to be looked at and dealt with seriously.

I welcome this opportunity to speak on this matter. Fine Gael will work in a constructive way with the Government but it should not ask us to sign blank cheques. Too many of them have been signed in the past.

Deputy Brian O’Shea

Gabhaim buíochas leis an Leas-Cheann Comhairle as ucht seans a thabhairt dom labhairt sa díospóireacht tábhachtach seo. Tá cursaí airgeadais na tíre go huafásach ag an nóiméad. Tá a fhios ag cách conas a tharla sé sin. B'fhéidir go dtógfaidh mé an seans seo chun leigheas nó dhó ar an gcruachás ina bhfuil an tír seo a mholadh.

I do not propose to describe the situation in which the country finds itself, or to rehearse all of the mistakes made by Fianna Fáil since coming into Government in 1997 when it inherited an economy producing 1,000 jobs per week in export-led ventures. The problems that arose and the mistakes made are all too well known. To say that there is a major crisis in the country's finances is to put it mildly. The announcement on banking by the Minister for Finance on 30 September 2010 underlined the extent of the problem. There are major concerns now about the country going back to the bond markets in January and how the markets will react in terms of purchasing Irish bonds.

There have been reports recently of what could be a win-win situation for the Exchequer and the ailing private pension schemes in the country. It is reported that up to €20 billion from the private pension schemes is available for investment in State bonds. If that €20 billion, or a large portion of it, was invested in State bonds it would ease the national debt crisis and help the troubled pension schemes return to solvency. The funds in the pension schemes are invested in bonds issued by eurozone Governments, mainly Germany and France. However, the very low yields on these bonds, somewhere between 2% and 3%, has caused many of the pension funds to move into deficit.

According to the Pensions Board, 75% of the country's defined benefit pension schemes are in deficit. The liabilities of the schemes was €45 billion at the end of 2008 but the assets to meet the liabilities are of the order of €32 billion. This means there is a substantial €13 billion gap, and regulators have given the pension schemes until the end of November to submit plans for tackling the problem. The problem of the pensions fund needs to be immediately addressed.

I understand that representatives of the pension industry have met officials in the Department of Finance with a view to switching more of their reserves into Irish bonds, with the yields on ten year bonds now hitting 7%. The facilitating by the Department of Finance of the switching of funds would seem to me to be very well worth considering positively. I understand there is considerable support for switching the pension scheme funds to Irish bonds but that the industry is seeking further guarantees. I call on the Minister and the Government to look at this issue as positively as possible.

At the time Waterford Crystal went into receivership, it was starkly and forcibly brought home to me that there is a major need for a pension security fund to be put in place. There is such a scheme in Britain but because there no such scheme in Ireland pensioners remain vulnerable. Although to some extent this is a separate issue, and one which would require that the fund be self-financing, it is an urgent matter and is directly connected with the proposal for the pensions industry to move major funds into Irish Government bonds issued by the National Treasury Management Agency. This would also have the effect of securing the future of pensioners and would reduce the pressure on employers to come up with additional funds to plug the shortfalls in their pension schemes.

A forecast based on calculations made last February reckons that investing in high yield Irish bonds would increase the value of pension funds from 40 cent to 60 cent in the euro for a typical pension scheme. Irish Government bonds are yielding far more now than they did last February. This proposal has the attraction of using the fallout from one major national problem to substantially solve another. I realise technical issues are involved and that issues need to be resolved but surely it makes very good sense to proceed down this road quickly given the possibilities that may arise when the pension funds go back to the regulators with their plans for returning their funds to solvency. The situation where pension funds are terminated and thereby people lose their rights, or their rights are substantially reduced or their return is substantially reduced, should be avoided at all costs. This has a bearing on the level of concern about how the markets will react when the Government goes back to the bond markets after Christmas.

The first priority, in terms of solving the financial crisis which presently faces the country is job creation. Recently, I was made aware of the following situation in my constituency by an employer in the tree servicing industry who took on five persons in 2009, three of whom were off the live register and two of whom had lost their jobs recently and moved back into employment with this employer. He met a person who was an unemployed tradesman and this person asked him for employment. He was impressed by the man and decided to take him on. This involved the young man having to undertake a course because he could not enter the industry without this basic qualification. The employer paid £912 to bring in a trainer and an assessor from Northern Ireland so that the person involved could get a City & Guilds qualification and thereby be qualified to enter the industry. The course took one week and when the person taking the course went to collect the jobseeker's allowance with a letter from his employer outlining that he had been training, he was denied it.

This is appalling. Surely all Departments and State agencies should be assisting in every possible way the unemployed to get employment. Employment in the tree servicing industry entails hard work. It is difficult work, but it pays quite well. I have been informed by the employer concerned that there is potential to create some 1,500 jobs in this sector nationally but that employers need assistance to cover the basic training costs and this is not forthcoming from the Government. Investment in job creation is what the Government must prioritise.

There is a considerable need to set up a university in my area of the south east. The south east is under performing in many ways and there is a need to provide within the region the research and development facilities, the graduate cohort and the fourth level education so that it can compete for the kind of employment that is coming on stream. In a recent letter to me, Mr. Barry O'Leary, chief executive, IDA Ireland, referring to potential companies, stated that IDA Ireland is fully committed to securing a balanced and regional development which includes the south east region, that the challenge is achieving an even spread of investment because the intensification of the sophistication of investments increases, and that they require a high concentration of a highly qualified and educated workforce, supporting infrastructure and high-level business services. Surely this highlights the urgent need for a university of the south east, with its hub campus in Waterford but with other campuses in other counties in the region.

There are other ways that the country can be made more competitive. The Government, through its agencies, must tackle the sheltered sectors of the economy. Whereas the professions have been hit hard there is the issue of the fees that are charged at the highest levels within the professions. This is an appalling inequity.

As we deal with our constituencies and we look at the national question, there are so many issues that require resolution. We can continually and rightly blame the Government but the greatest blame that rests with the Government is its total inaction in dealing with the issues and problems in the economy that so many people are facing.

One problem I encounter on a regular basis is the area of mortgages. There are so many people who now have very difficult problems with their mortgages. There is a particular issue that keeps coming back to me, that is, how the system treats the self-employed who become unemployed and the difficulty this particular sector encounters in acquiring social welfare payments. I refer to persons who have paid their taxes, who have employed others and who now have fallen on bad times. The fact that those who apply for jobseeker's allowance are assessed on their income in 2008 rather than their income last year and in the current year is something that needs to be seriously and immediately addressed. The mortgage situation, which I mentioned earlier, and the restrictions on access to the mortgage subsidy, are matters that need to be revised and dealt with quickly.

Clean energy is an area which the Government is not addressing sufficiently. A representative of Sustainable Energy Authority of Ireland, whom I listened to lecturing recently, put it that over a 15 year period 100,000 jobs can be created in Ireland based on clean energy. The Government, unfortunately, not only on this front but on so many fronts, appears to be paralysed in terms of ideas and initiatives.

There is no denying we are in a very difficult situation, albeit one created in the main by this Government but we will not get out of it unless we tackle it. There is still some doubt as to the full extent of the banking debt. We got the figures on 30 September and the measures being put in place to deal with that have been rehearsed to us but there is still the issue of credit for small businesses. The public service system, which is not fast enough in terms of delivery and is tied up in all sorts of red tape, is not fit for purpose to deal with the current economic situation. There are many fine people working in the public service but their ability is being under-utilised because they are locked in with methodologies and systems that give no scope for exercising in full the many abilities they possess. What is the Government doing to address this?

We need to see a great deal more internship schemes. It is frightening the number of people who have succeeded in getting good third level qualifications, cannot get employment and are leaving our shores. Unfortunately many of them will not return. Certainly, they will not return in the short term.

New graduates need to get job experience. There is little scope for them to acquire that. If a new graduate seeks employment, one of the first questions he or she will be asked is what practical experience he or she has. There is a major need for the introduction of a widespread internship scheme across the economy in the public and private sector. We would not want such a scheme to be exploited by unscrupulous employers who might use it to replace existing employees or not employ people on a full-time basis. Graduates could be taken on, retain their social welfare benefit with a top up to some level, and assigned to a position where they would do real work which would expand their qualifications, give them experience in the field and make them more fit for purpose.

The basic issue of the dignity of work, namely, having a reason to get out of bed in the morning, feeling that one is useful and is doing a useful job on behalf of the community, needs to be considered in this context. It is terribly demoralising to be looking for employment when there are no jobs. When people apply for jobs, they get refusals or do not get any response, they are not called for any interviews and then they begin to doubt themselves. Therefore, it is important for new graduates to be in the workplace, doing something useful, albeit on a scheme that is temporary in nature because of the current economic circumstances.

We have to do much more than talk about our great potential — our magnificent young educated workforce, which we still have although many young people are now leaving the country. We must show our young people that we value them by giving them an opportunity to get into the workplace where they can develop their skills, gain experience and avail of opportunities when the upturn comes. We need to show them they are a useful part of the economy.

I encourage the Government to get down to the job of turning things around on the jobs front. A figure that sticks out in everybody's mind is that for everyone who comes off the live register there will be a saving in terms of welfare benefit and a recoupment in tax payment and the gain to the Exchequer will be approximately €20,000 per year.

Deputy Jan O’Sullivan

I wish to refer to some of the previous points made during this debate. I listened to some of the debate last week and the catchcry from the Government benches was that we should forget about the past and only look to the future. Backbencher and backbencher said that we need to give up being angry because anger is not a policy that we need. That was said the same day that the gentleman from the west drove his concrete mixer into the gates of Leinster House. Despite what we may say about him he certainly struck a chord with many people who feel that anger is probably the only outlet they have and want their anger to turn into meaningful action.

Another point that has been made is that everyone must share the pain. Anger is a very good place to start in developing a policy that will ensure that €50,000 million is never again robbed from the Irish people because of a complete failure to control rampant capitalism. That is basically what happened. There was a complete failure to control the extreme elements of uncontrolled capitalism at its worst.

We must understand why people are so angry. We must also understand why people say: "Why should we share the pain at the levels the Government appears to want to make us share it?" Poor people did not cause this crisis, neither did families whose sons and daughters are now likely to put down their roots in faraway shores. We must start at the top with those people who can afford to pay. There are still loopholes in the system whereby people who earn the highest amounts of money and have the most wealth still do not pay their share; they still get away with doing that because of tax breaks.

Before I proceed to talk about the general issues of finance, taxation and banking, I wish to refer to an area that is in my brief, that of the co-located hospital project. Incredibly that project is still on the table and it carries a 41% tax relief for developers. The Minister for Health and Children indicated in the Dáil recently that she still intends to go ahead with some of the planned co-located hospitals. This is despite the fact that her expert group on the financing of the health services clearly stated that we have enough private beds in the system already. Yet she proposes to go ahead with the plan to provide private beds and to use taxpayers' money to give tax breaks to the rich developers who intend to develop those hospitals. That is an example of where the people at the top will be facilitated with tax breaks for something that we do not need while the people at the bottom, those on low incomes, are now likely to be brought into the tax net. People in receipt of social welfare benefits, carers and people with disabilities are being asked to pay because the Government says that everyone must share the blame. The Labour Party believes that the Government should start at the top and when we are in government we will start at the top; it will be the people at the top who will start to bail us out and not the people at the bottom.

In terms of learning from the past, I cite the example of Germany. It went through two world wars, both of which it lost, but it has learned from what it went through, which it caused to a great extent, in terms of how it has structured its economy and society. The Germans have certainly learned lessons from their history. Germany has developed into one of the strongest European economies and also managed to absorb East Germany without too much disruption to its economy and its society. The Germans value their service and other services, the importance of solidarity and of engaging with the public and ensuring that extreme elements do not take over.

This republic is fairly young, but if we do not learn from what has been the biggest crisis in our history, the mistakes that were made will be repeated. The most important job we have to do as public representatives at this time in our history is to ensure that we learn from the lessons of what happened to our Celtic tiger economy and that we do not allow what happened to ever happen again. If we do not learn those lessons, we are in danger of the same cyclical behaviour happening again, the same money-grabbing people will again try to use the wealth of the country for their individual benefit. We need to develop the qualities of solidarity and a sense of society and economy that is about us all sharing in what we want for this country. We must learn from what happened in the past.

Therefore, we must take note of what Professor Honohan said and not take only a simplistic view of it. He made it clear that the decision to bring in a blanket guarantee was not the result of a sudden crisis but followed months of meetings led by the Department of Finance. It is simply inconceivable that the Minister and the Taoiseach were not briefed on what was happening at the time, yet they brought in the blanket guarantee. The Labour Party is proud to have opposed it. There are many elements of that blanket guarantee that are now haunting us in a huge way. In regard to subordinated debt Professor Honohan also stated: "Given that the whole point of subordinated debt is to be a form of risk-absorbing capital, and as such is sold as being explicitly more risky than senior bonds, it would have been reasonable to argue that subordinated debt holders should not be exempt from possible losses; as far as can be determined, no guarantee offered by any other government during the crisis covered such risk-bearing liabilities."

He also referred to the note prepared by Merrill Lynch which observed that the assumption of such a large contingent liability would have an adverse effect on borrowing costs for the State. Despite clear warnings, the Government proceeded with the blanket guarantee. As a result, enormous sums of money will be transferred to future taxpayers and the Labour Party and Fine Gael, the two parties that will presumably form the next Government, will be bound by certain undertakings. There is no doubt that the mistakes made in this area contributed significantly to the problem.

Another reason for our current problems was the lack of regulation which allowed the banks to get away with murder. It is a disgrace that the banks lent such large sums of money to individuals, frequently in the knowledge that the loans in question were tied up with and backed by other loans from other lending institutions for other properties. This responsibility for the tangled mess that has ensued lies with the Financial Regulator, Central Bank, Department of Finance and banks, specifically their boards, risk management experts and senior managers. That some of these individuals continue to hold positions in the banks is a disgrace, which the Minister should address.

On the issue of the banks making money available to businesses, I will refer to a response to a parliamentary question I received from the Minister for Finance on 3 February this year. One of the major problems with the banks is that they have taken our money and used it for their own purposes by shoring up assets and improving liquidity. We were informed that the purpose of the bank bailout and National Asset Management Agency was to safeguard the stability of the State and provide money for small businesses to reactivate the economy and maintain and create jobs. In his reply on 3 February, the Minister for Finance stated the following:

Under the NAMA legislation I will shortly be issuing guidelines to all banks participating in NAMA who lend to SMEs, to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the banks. The purpose of this measure is to ensure that the benefits of NAMA lead to an improved flow of credit to viable businesses.

He indicated he would establish a review system and use the information it provided. He stated:

In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit.

This statement was made in early February this year yet Deputies from all sides are still being contacted daily by individuals who run viable businesses or are setting up new businesses and cannot obtain credit. Many of them have done the necessary research and know their plans are viable. One man who contacted me has found a market for his product in Britain. He attended the relevant trade fairs in the UK and secured orders for his product, for which he has also drawn up a design. Despite investing redundancy money he received from a previous job in the product, he is unable to secure further capital from the banks. This is a major problem for many other people with viable products and the owners of businesses which are likely to go out of business without credit. What has changed since the Minister for Finance gave an undertaking to make credit flow for small businesses?

I am pleased to note the Minister of State with responsibility for housing is present as I propose to raise a number of issues related to housing and local government. Limerick city, like many other cities, has a large number of empty shops. One of our local newspapers recently compared the position of Galway to that of Limerick. While we tend to regard Galway as a thriving city, the survey revealed that it has as many empty shops as Limerick and the same is probably true of other cities, towns and villages. Premises are empty for a variety of reasons, including the Government's refusal to support the Labour Party Bill which would have abolished upward only rent reviews. Shops are also closing because their owners cannot secure money to tide them over in these hard times. Shops are the lifeblood of cities and towns in that they provide employment and their closure has a negative impact on the surrounding economy and community. People no longer want to travel into city centres if they are not vibrant. I urge the development of a plan to enable local authorities to assist in this regard.

The opera centre in another part of Limerick city was a major plan by one of the large developers to develop a site in the city centre. The developer in question bought out many small shops, some of which moved elsewhere while others did not re-open. The project then collapsed. I am not sure if it has been transferred to the National Asset Management Agency but if not, it will probably transfer at a later date. The area in question, which is in the centre of the city, is now an eyesore. Where once we had thriving small shops and other businesses, we now have a large empty space. Limerick City Council is trying to produce a plan for the area but does not have cash available to take action. The Government should assist in this regard, albeit not necessarily by providing money. It should at least ensure the banks are more free with their money.

The Labour Party has proposed establishing a strategic investment bank using €2 billion of the National Pension Reserve Fund and additional funds secured from other sources. While the State owns a number of banks and has large stakes in several others, the established banks have their own ways of doing things. If we started afresh with a new strategic investment bank, we would be able to achieve the outcomes we seek.

The concept of the solidarity bond could also be developed. While I welcomed the establishment of the bond, I note it has not been advertised as a means of allowing people to be patriotic by investing money in bonds that would be used to fund positive developments. Perhaps we should introduce a diaspora bond aimed at those from other countries who have Irish origins and have made money.

The Government had a big bash in Farmleigh recently which attracted a large number of participants. It should use this concept to encourage people to invest in Ireland. Perhaps individuals could be allowed to choose where they wished to invest. For example, a person from County Limerick who emigrated to the United States and made good there could decide he wants to invest in an enterprise under development in Limerick. He could then ask the Government to facilitate his wish through some form of bond system.

If we are to pull ourselves out of recession, we must begin to think in such imaginative ways and use what is positive about this country. The problem for people who have ideas and want to rebuild the economy is that the Government is preoccupied with fiscal balance. Last year, its focus was on the banks and this year it is focused on achieving fiscal balance at the expense of job creation. People despair when they see money being taken out of the economy because it means there will be less to spend. We must find ways of bringing money into the economy, whether from domestic or overseas sources, some of whom may wish to provide money in a spirit of good will or out of a desire to stand by the Republic, if I can use that phrase given that the individuals in question may no longer live in the Republic.

In addition to activating money, we must activate people. Many of our young people are out of work, an issue discussed by Deputy O'Shea. Some of them are moving abroad and putting down roots elsewhere. I heard a programme recently about the Dubai women's Gaelic football team. Two of the women interviewed were physiotherapists who had to moved to Dubai because they could not secure employment here.

They had been obliged to go to Dubai because they could not get a job here. It is not so many years ago that it was decided to deal with a shortage of physiotherapists by providing additional courses in universities but they are now playing on the Dubai ladies' football team.

This is what is happening under the Government policy, which is the reason a different approach must be adopted. We must attempt to keep young people in Ireland and find ways to employ them. In this regard the Labour Party has proposed a jobs scheme. While I acknowledge the Government has set up one or two schemes, it appears to want to hide them. There is a jobs placement scheme under FÁS and a graduate placement scheme but it is very hard to find out about them. Moreover, I am informed by employers that it is very hard to register on the scheme indicating one's desire to place a graduate in one's business. The graduates involved do not receive any additional money but simply get their dole payments. They must also be unemployed for three months and a number of other conditions also apply. However, it is as though the scheme does not exist as one never hears anyone talking about it. The new scheme, announced recently by the Minister for Social Protection, Deputy Ó Cuív, appears to be very similar to the scheme that is already in place about which no one appears to know anything. One must be serious about wanting to get people back to work. One must facilitate them to so do and must provide them with opportunities of this kind.

I also wish to make a point I have raised previously in the Chamber about county and city enterprise boards running out of money. I was approached by a person who had an Internet business, already employed a small number of people but wished to employ more. He had applied to the Limerick city enterprise board and was approved, only to be told subsequently that the board had no money. Although he had fulfilled the criteria, the enterprise board had no money to give him.

It is crazy for an enterprise board not to have enough money for a viable enterprise in the current economic climate. Whatever else might face cutbacks, the Government should allow enterprise boards at least enough money to fund ideas which the boards consider will create wealth and jobs because we will be in deep trouble unless we begin to mind and nourish ideas for job creation. We cannot simply continue to rely on multinationals and so on but must encourage indigenous Irish industries and ideas. While there are many campus projects and people with ideas, the task is to match such ideas with money and support.

This very useful debate has been going on for some time and is drawing to a conclusion. All these issues are closely linked. Many Members have spent much of their time discussing issues such as enterprise and activation, which are closely linked to the banking crisis because enterprises cannot get going or cannot remain open in the case of shops and businesses precisely because the banks are starving them of money. The Government should keep an eye on the broader picture, on the suffering of the people and on the need to give them hope and opportunity. Rather than simply focusing on one issue at a time, that is, first on banking and now on the fiscal crisis they must all be considered together and the people must be given some positives for the future.

Deputy Thomas P. Broughan

I am pleased, in my renewed position as a member of the parliamentary Labour Party, to be able to speak on the banking crisis and the financial situation. Since the outset of this crisis, when the Labour Party stood alone to oppose the blanket bank guarantee, I have always strongly opposed the entire approach of the Government and especially its policy of bailing out the casino banks, namely, Anglo Irish Bank and Irish Nationwide Building Society. These two institutions were not and are not of systemic importance to the Irish banking system and as institutions they behaved recklessly and criminally for the benefit of a small nexus of cronies.

The approximate €50 billion bank bailout figure announced by the Minister for Finance, Deputy Brian Lenihan, last Thursday week was horrific. Many people are still trying to understand how the toxic triangle of developers, bankers and Fianna Fáil and Fine Gael politicians has got us into such a mess that the Government intends to pour €29 billion to €35 billion into Anglo Irish Bank, €5.4 billion into Irish Nationwide, perhaps €11 billion into AIB, €3.5 billion into Bank of Ireland — one may not have heard the entire story in that regard — and €350 million into the Educational Building Society. A few weeks ago, a Sunday newspaper estimated the full costs of the systemic bailout to be between €45 billion and €55 billion for the recapitalisation and perhaps €45 billion for NAMA. When added together, this provides a possible total cost of €100 billion. In addition, the impact on the national debt is staggering, as the general deficit will hit 32% of GDP for 2010, even though only a few months ago, the Taoiseach was in this Chamber blathering on about how to cope with a debt of 20% of GDP.

The question being asked by all Members' constituents is whether the mind-blowing figures announced on black Thursday constitute the final reckoning. The key concern of everyone observing Members today is whether this is the bottom line on how much the Irish banking sector will need. All the Minister's previous estimates have turned out to be wildly incorrect, misleading, inaccurate and sometimes simply downright lies. Consequently, why or how can citizens accept this latest forecast to be definitive? A number of months ago, a financial analyst informed me of his belief that the bailout losses would be approximately €50 billion at a time when the Minister was still insisting they would reach a maximum of €35 billion. Moreover, banking expert Mr. Peter Mathews also has mentioned an incredible figure of €65 billion.

As there are so many basic pieces of information about which Members have no hard data, the Minister should respond to the questions I am about to pose. How much will the promissory notes cost each year into the future? What about the exclusion from NAMA of the loans between €5 million and €20 million? Will the €7 billion of debt represented by these smaller loans not act as a deadweight on AIB and Bank of Ireland for decades to come? Will Ireland end up as another Japan over the next two decades, that is, treading water, barely trying to keep going and with a national debt of 200% of GDP? What impact will the Hallowe'en deadline for NAMA transfers have on the figures? The original intention was to work through them carefully and slowly but it now must be done within two or three weeks and surely the entire point of NAMA was to examine forensically every bad loan. Will even more surprises emanate from NAMA after 31 October? Its chairman, Mr. Frank Daly, now appears to be stating that the final figure will not be known until February 2011.

The Minister for Finance, Deputy Brian Lenihan, told Members that one of the key objectives of NAMA was to remove the toxic loans from the banks' balance sheets and to get liquidity back into the system. However, the bigger than expected discounts that NAMA is now applying to loans mean that the banks need much bigger sums of public money for their recapitalisation. Only yesterday, the Minister informed me that the interest figure for 2010 will be approximately €300 million less than the €5 billion he indicated to Members earlier this year. However, he stated that next year, it will be between €6.7 billion and €7 billion.

This means that a huge chunk of national taxation will go down the tube month after month into the vortex of this horrible disaster. If this is the true picture of how profoundly damaged is the Irish banking system, why is this only being found out two years down the road? Banks in the United Kingdom, which adopted a completely different policy in 2008, are already returning to profitability. The Labour Party urged early action to clean up the banks and to restore liquidity for businesses and households but what we got instead were two disastrous wasted years with soaring unemployment, emigration and misery because of the constant dissembling and gross incompetence of the Minister for Finance, Deputy Brian Lenihan, and his colleagues.

The Fianna Fáil-Green Party bank bailout has been characterised by constant misinformation and uncertainty about the true state of the banks. Incidentally, as I have stated a number of times at the Committee of Public Accounts, the Department of Finance has proved itself to be not fit for purpose. Clearly, it has a major role in the banking and economic collapse through its total failure to undertake effective economic forecasting, effective strategic plans — Deputy Reilly mentioned that point this morning — or to even moderately invigilate the banks. Shortly after the 2007 election, I asked that Mr. Neary, the then Financial Regulator, be invited before the Committee of Public Accounts to explain himself because I believed there was a fundamental problem with the banks. Mr. Neary appeared before the committee and told its members an outrageous pack of lies about the stability of the banking sector in early 2008. While a member of the aforementioned committee up to a few months ago, I read out what he had to say and every line he told members was rubbish, nonsense and lies.

Although Professor Brian Lucey first raised the issue of the lack of legislation permitting subordinated bondholders to share in the losses unless the senior bondholders are in default and a bank is in a special form of parliamentary proceedings, Members did not hear this on black Thursday. We had to wait for several days until Brian Lucey told us in The Irish Times that additional legislation was required. The Minister, Deputy Brian Lenihan, did not seem to have any idea from his briefing with the Department of Finance that there was a major problem in regard to subordinated bondholders and so on. Despite repeated statements to the contrary by various embattled Ministers, Professor Honohan’s report does not categorically find that a blanket guarantee was necessary. While he stated that it could be helpful in certain circumstances, he did not conclude that it was essential. Moreover, he questioned such a commitment to senior bondholders. That crazy decision was an act of criminal behaviour against Irish citizens.

It was amusing this morning to hear the leader of Sinn Féin speak about being a party in opposition. The Labour Party was the only party in opposition in September 2008 when our 19 Deputies voted against the blanket guarantee in this Chamber. How can we have any trust in a system that is still largely administered by the senior bankers, Ministers, accountants, auditors and regulators who contributed so much to this catastrophe?

The Minister, Deputy Brian Lenihan, has often described Anglo Irish Bank as being of systemic importance to the banking system. Yet he gave the institution a blank cheque in September 2008 without being aware of its true situation. No evidence was ever produced to support the claim of systemic importance. A pertinent footnote in Professor Honohan's report considers the notion of a bank guarantee for all the institutions with the exception of Anglo Irish Bank. Yet we had various Ministers talking to the media who had not even read the report. Phoenix magazine has rightly raised the grave matter of whether the current regulator, Mr. Matthew Elderfield, accepted questionable figures from the board of Anglo Irish Bank in its 2009 annual report.

The folly of the Government's blank cheque approach to Anglo Irish Bank was exposed by the recent decision to split the bank into a so-called funding bank and an asset recovery bank with plans for an eventual wind-down of the failed bank without it ever having positively contributed to economic recovery. What was the purpose of the Government decision in this case? The Government continues to refuse to address the responsibility of senior bondholders in Anglo Irish Bank. There is still a strong case to liquidate the bank and its fellow casino institution, the Irish Nationwide Building Society, as quickly as possible and with as little further cost to the Irish people as possible. We should seek to recover all taxpayer losses from the perpetrators of this disaster. People ask me every day why Seán FitzPatrick, his fellow directors and senior management have not been prosecuted as would be the case in most other countries. In the case of the Chilean disaster, for example, the director of the company in question is already in police custody.

The Fianna Fáil-Green Party Government childishly attempted to smear the Labour Party's original banking policy to nationalise temporarily those banks that are of systemic importance, namely, Allied Irish Banks and Bank of Ireland, in order to protect ordinary depositors and to get credit moving to businesses and householders. The Black Thursday announcement by the Government reminded me of the famous description by Seamus Mallon of the Good Friday Agreement as "Sunningdale for slow learners". It took the Government two years to realise there were fundamental problems with Allied Irish Banks and Bank of Ireland.

According to the Minister, Allied Irish Banks will require capitalisation of at least €11 billion with the result that the State will have 90% ownership of the bank. If it had been temporarily nationalised two years ago there would have been a lower cost and a reduced risk to taxpayers as well as the opportunity for the State to clear out the senior bankers who made the bank insolvent. Under a nationalised system the valuation risk is massively reduced as loans can be transferred at market value rather than according to the Minister's fantastical notion of long-term economic value under NAMA. Both the IMF and the former Swedish Finance Minister, Bo Lundgren — who undertook a very successful temporary nationalisation programme in that country — highlighted this reduced risk factor as one of the most important advantages of nationalisation.

What has become clear in the past two years is that the appalling practices of the top bankers in Allied Irish Banks must be rooted out once and for all. That culture must be smashed. This is particularly imperative given the repeated scandals of the 1980s, 1990s and 2000s at the bank. That so-called distinguished gentleman, Mr. Peter Sutherland, has in recent weeks been lecturing the nation on the need to reduce social welfare provision, education spending and so on. Is this the same Mr. Sutherland who was chairman of Allied Irish Banks in the 1990s when acts of gross criminality were carried out against taxpayers? Is it the same Mr. Sutherland who was a director of Royal Bank of Scotland when it had to be bailed out by the British taxpayer for at least €45 billion? Is it the same Peter Sutherland who was so closely connected to Goldman Sachs, an organisation described by the last British Prime Minister as "guilty of moral bankruptcy", a company which defrauded tens of thousands of American investors with a Ponzi scheme whereby credit derivatives were bundled into packages, floated off and then bet against? Why should we heed Mr. Sutherland's advice about anything?

I have the same objections to being offered advice by Mr. Ray MacSharry who, as Minister in the late 1980s, implemented savage cutbacks in services. Those cuts led to desperate suffering for our most vulnerable citizens some of whom died waiting for hospital treatment. That was the legacy of the implementation of Mr. Colm McCarthy's first programme of reductions.

If Allied Irish Banks had been temporarily nationalised two years ago it might not have had to sell its crown jewels in the form of its profitable operations in Poland and the United States. The Minister should consider the retention of the bank in public ownership as a national "good bank". We had such a good bank in the 1980s and early 1990s when the State effectively owned the various TSB banks, together with ACC and ICC. In the 1992 general election, my party proposed a third force or people's bank loosely based on an amalgamation of the three State banks led by TSB. There is no question that such a model would have worked and would have provided much needed domestic competition to Allied Irish Banks and Bank of Ireland.

We should explore the possibility of making all 4.25 million citizens equal shareholders in Allied Irish Banks, as one of my constituents constantly advises me. The British Co-operative Society has a membership, at 5 million, that is larger than the population of this country. We should take 100% control of Allied Irish Banks and retain it in public ownership for a long time to come. The Labour Party has also developed proposals for a strategic investment bank to provide credit facilities to small and medium-sized enterprises, invest in innovative companies and take the lead in raising finance for appropriate infrastructural products. If we lead the next Government we will implement that proposal.

Apart from Anglo Irish Bank, the failure of the Government, Central Bank and Financial Regulator to regulate the Irish Nationwide Building Society is one of the greatest financial crimes against the Irish people. Raising €2.7 billion and paying savage interest on that vast sum for years just to dump it into the black hole of INBS is a criminal policy and an act of treachery against this country. Constituents ask me all the time why Mr. Michael Fingleton and his directors and senior management have not been prosecuted.

The shocking failure of corporate governance at the Educational Building Society between 2002 and 2008 shows the contempt of Fianna Fáil, the Progressive Democrat Party and the Green Party for mutual institutions. The EBS board and all its senior executives from the pre-September 2008 era should depart immediately. Its actions in becoming involved in speculative commercial developments bankrupted this society and betrayed its 600,000 members, of whom I am one. Those leaders should be investigated by the Garda Bureau of Fraud Investigation and the Office of the Director of Corporate Enforcement.

The Minister for Finance's proposal to sell off the EBS is a profound mistake. I have already asked him to consider retaining the EBS in State ownership until the Government can establish a strengthened mutual building society and co-operative model. This new structure could perhaps be based on models such as the John Lewis Partnership or the Banque Populaire in France. We must take control of the EBS from the bottom up. Other governments including, surprisingly, the Conservative Party-Liberal Democrats coalition in Britain are examining measures to enhance the role of mutuals and co-operatives in a reformed banking system that prioritises the needs of ordinary households and businesses. Yet here in Ireland we are privatising the EBS even though it was probably the best organisation in the financial system.

One of the broader issues that has been highlighted by the current catastrophic crisis is the rotten mortgage system that has enslaved many of our citizens. It was amusing this morning to listen to Mr. Peter Bacon speaking to Pat Kenny on the radio. He spoke on the very important subject of the huge burden of private debt, particularly on young people. Back-breaking mortgages are crucifying them. We need to look at the whole mortgage system. We should have built in a mechanism to alleviate this burden, as was done by some banks in the United States which cut the capital figure. I welcome the campaign of bodies such as London Citizens, a wonderful organisation, which is trying to address the back-breaking nature of interest payments for many families and individuals in the United Kingdom. This approach needs to be extended to the Irish mortgage market.

Auditing and accounting firms must also be held to account for their failure to detect and report out-of-control speculative and criminal activity in the banking system. Why have we not had an investigation of what went wrong in the auditing and accounting industry accompanied by major reforms to make sure it never happens again? Public confidence needs to be restored in these discredited professions. An ordinary Joe Soap would be sacked if he failed so abysmally to carry out his key work functions and responsibilities. Instead, the big four auditing and accounting firms, KPMG, PricewaterhouseCoopers, Ernst & Young and Deloitte, and many other legal, accounting and auditing companies are allowed to carry on their merry way. Not alone that, they are at the heart of the Fianna Fáil-Green Party bank bailout strategy and paid millions.

The law firm, Arthur Cox, for example, which was up to its neck in advising Anglo Irish Bank, AIB and Bank of Ireland on property deals, was, rightly, named by The Sunday Tribune as one of the untouchables which caused the financial crisis, yet, according to the Comptroller and Auditor General, this company earned €3.9 million between September 2008 and June 2009 for advising the Government on the State bank guarantee, the nationalisation of Anglo Irish Bank and the recapitalisation of AIB and Bank of Ireland. A Greek citizen, who is a certified auditor, contacted Members of the House to ask how, if Anglo Irish Bank’s accounts were certified by auditors, it went on to collapse. Another person e-mailed me yesterday and signed himself “yours in despair”. He asked why Goldman Sachs is so heavily involved in Irish affairs, given its toxic role in the domestic and international financial crash. I have already referred to the unbelievable vapourings of Mr. Peter Sutherland.

I have already mentioned The Sunday Tribune listing of 20 untouchables. It is outrageous that so many people mentioned on this shameful list are still in their positions, yet a number of members of this group, including senior civil and public servants, may wonder how they are part of the group while their political masters in Fianna Fáil and the PDs are nowhere to be seen, except, perhaps, in cupboards advertising the News of the World. The Sunday Tribune list is like Hamlet without the prince. The princes in this case are five politicians — three right-wing ideologues: the Minister, Deputy Mary Harney, and former Ministers Charlie McCreevy and Michael McDowell and the current and former taoisigh, who are still trying to portray themselves as deluded fools, using the Bart Simpson defence. The poor former Taoiseach, Deputy Bertie Ahern, is still waiting for Mr. Neary or Mr. Hurley to call to tell him the country is going down the tubes and something needs to be done to deal with the economic bubble. He does not know how this happened. He is going around the world lecturing people about the peace process. I accept we were all involved with that, and it is a wonderful achievement, and we were all involved in the Celtic tiger. It is incredible nonsense to tell us he is waiting for that call.

It is also more than a little disturbing, as Senator Shane Ross has noted, that the Minister recruited the architects of the critical valuation system from deep within the toxic banking and property development vortex that helped to create this catastrophe in the first place. Did the Minister make any effort to recruit valuation experts internationally, especially from states such as Germany or the Netherlands that have had fairly stable property systems for the past decades? At the height of the property bubble the economist, David McWilliams, wondered how a small terraced house in Dublin 7 or 8 could be worth more than a chateau in southern France or a farm in Munster in central Germany. How could that have been possible? It is incredible that the Department of Finance, regulators, taoisigh and Ministers for Finance could not understand that this was an anomaly.

The role of the IFSC and its impact on national tax policy and the invasion by foreign banks, like Bank of Scotland, needs to be investigated. I commend the ordinary staff of banks, some of whom are facing tough futures, who looked after us day in and day out. They often point to the destabilising role of the off-shore element of the IFSC and how it damaged our larger banks. They talk, in particular, of the foreign invasion led by Bank of Scotland, which gave mortgages of more than 100%. Opposition Members raised this matter with the Taoiseach at the time but he did not seem to think he could do anything about it. Of course, he was only the Taoiseach.

Ireland has a structural fiscal deficit but it is the banks and the Fianna Fáil-Green Party blank cheque approach to bailing out banks that has wrecked our fiscal position for the foreseeable future. In 2009, the budgetary position deteriorated by approximately €11 billion of the €22 billion, simply due to the banking crisis. Colm McCarthy, and those in the media and the Government who hang on his coat tails, told us, day after day, that we had a deficit of €22 billion. However, it was the banks that wrecked us, are wrecking us this year and will wreck us next year and the following year. It is so annoying to have to impose this on ordinary people. The Fianna Fáil-Green Party slash and burn approach means we will kill the patient in 2011 by totally deflating the economy and facilitating no stimulus measures to tackle the jobs catastrophe and enhance consumer confidence.

In contrast, the policy of the Labour Party is the correct one. We have been clearly focusing on jobs and investments through our policies on the strategic investment bank and on investing in SMEs and innovative companies, retraining opportunities, schools, broadband, communications and public transport. I am a big supporter of major infrastructural investment. In my own region we have done huge preparatory work on metro north. Approximately €160 billion has already been spent on the project and it will, I hope, be passed by An Bord Pleanála in a few weeks time. The immediate preparatory works done next year will be of the order of only €50 million. As a public private partnership, it will not impose a great immediate cost as we try to get out of the fiscal crisis.

We can frame a budget for next year. I believe we should do this year by year and one step at a time. The guys and girls who got us into this mess should not try to tie us down for four, five or ten years into the future. We must get out of the mess one step at a time. With a Keynesian-Paul Krugman approach we would gradually work our way out of the debt and rebuild our country. The people who are responsible for this, including the politicians, should be held accountable.

Acting Chairman (Deputy Charlie O’Connor)

Another chairman might have said it is not appropriate to name people who are not in the House. However, you did so, so that is okay.

Deputy Brendan Howlin

I am glad to have the opportunity to contribute to this debate. I am not glad the debate is happening because this is one of the most serious issues I have ever risen to address in my time in this House. Of course, this is not a debate. It is a series of statements. We need to re-assert the relevance of the House and ensure that the sort of clinical analysis provided by my colleague, Deputy Broughan, is responded to in a meaningful way and that the people who are making decisions in the short term are listening and engaging and are required to account. For the moment, we must put up with statements, where people are at least able to state, for the record, their views on the calamity that has befallen our nation, brought about by a lethal combination of individuals.

I begin my contribution in the middle of the story and make mention of the night of 29 September 2008 when the most calamitous decision ever made by an Irish Government was made. At that moment, the country was brought to its knees. The Government has spun a story from that night but it is not even able convince its own backbenchers, as yesterday's comments from Deputy Seán Power on "Morning Ireland" attest.

In great ignorance calamitous, a decision was taken to sign a blank cheque which turned into a noose around the neck of all citizens and their children yet to be born. The decision has been spun as being the only thing to do and the Governor of the Central Bank, Professor Honohan, was spun as confirming the righteousness of the decision even though he did no such thing. Professor Honohan confirmed the need for an expansive guarantee but the Government provided a blanket guarantee for a black hole of money. It had no notion of the size of sums involved then and it since made several stabs at arriving at the figure. We have long sought to determine the cost of that ruinous decision and have been given various estimates. The latest reply from the Government is that it hopes the final figure will be between €45 billion and €50 billion.

This ruinous cost is being taken on by the State for a rotten institution called Anglo Irish Bank and a small cabal of developers, ten of whom had loans of between €1 billion and €3 billion. A lauded group of cowboys was given access to sums of money so vast as to be outside the comprehension of most people. Most of us are bewildered by the thought of billions of euro but these cowboys were unconditionally given any sum they wanted and for virtually any purpose.

Our problems were crystallised in Anglo Irish Bank. Profligate bankers, drunk on their capacity to shovel out borrowed money, believed they were masters of the universe and the creators of the Celtic tiger economy. They lectured all and sundry about their Midas touch. The political masters were blind to the impending catastrophe and deluded about the function of a real economy. A small group of politicians centred on the Progressive Democrats and the core of Fianna Fáil believed they could shrink this nation's tax base while at the same time finding sufficient money to fund social provision through a giant pyramid scheme. The regulators were unfit for purpose. I recognise they were hobbled by a Government that made clear it did not want to hear from naysayers but despite their substantial salaries they were content to keep their heads down as the tragedy unfolded. They considered their duties were met by the odd muted suggestion that perhaps matters were getting out of control. The developers saw they could cosy up to politicians while they invented the perfect money spinning racket. They were able to access boundless capital from their crony bank and develop any site they wanted with problem free planning permission. They bid up the price of land to unprecedented levels and nobody said "No". At the end of the day, they rolled their debts over for profit. They believed the racket would never end. Any gobdaw could make a profit, and many did.

The first casualties were the ordinary men and women who wanted to buy homes and start their families. They were told to move quickly, to queue overnight, and to pay any price in case the homes became more expensive the following day. The so-called lucky ones who signed up for mortgages when they began their family lives are today saddled with crippling debts, reduced incomes and negative equity. These were the first casualties but, by God, they were not the last. The cost of the crisis was not confined to first-time buyers because every man, woman and child is required to pay for the mistakes of an evil and vicious set of people who connived with the Government to bring us to our knees. This cost will be with us long into the future.

The most offensive phrase, and the one which grates most with people, is: "we are where we are", as if some malevolent external force from Mars brought this proud nation to its current sorry state. The day is not far away when the people will have the opportunity to hold to account those who were politically responsible. All the spin in the world will not exonerate their guilt. The people will make that determination and they cannot be dodged forever. It will be for others than the people who brought us to this catastrophe to map a way out and to give hope and leadership.

The Labour Party will play its part. We have accepted the economic parameters agreed with the European Commission and will support efforts to reach the deficit target of 3% of GDP by 2014. We have a clear understanding of the difficulties involved in reaching that target. We have a track record of doing the right thing in these matters, unlike some whose record is of bringing the economy to its knees on more than one occasion. I was privileged to serve in Cabinet from 1993 to 1997. That Government made hard decisions. Unusually, the very night we received our seals of office on a cold January in 1993, we were briefed by officials from the Department of Finance on the difficult state of the public finances. That Government and its immediate successor, both of which had a very significant Labour Party component, made hard decisions on expenditure. I was Minister for Health for its first budget and Minister for the Environment for its second. They were big-spending Departments and there were big demands placed on them. The Labour Party made difficult decisions on taxation that had an impact on everybody.

Furthermore, decisions were made on creating jobs, generating growth and creating the potential for the economy not to be crippled. From an extraordinarily difficult position, the Labour Party helped to map a route to progress. When we left office in 1997, we had been creating 1,000 new, real sustainable jobs every week. We left a balance-of-payments surplus behind us for the incoming Government. The national balance was in credit. We left behind us an economy built on sound job creation principles that resulted in sustainable jobs, manufacturing jobs and export-driven jobs. There were affordable houses in respect of which one could calculate one's mortgage entitlement on the basis of one's annual salary. One could get a maximum of two and a half or three times one's salary. That was the lie of the land.

It was a question of developing social services that could be paid for and sustained. That is Labour's record. When people criticise us and say we do not know how to do things or are afraid of hard decisions, they should note we have picked up the broken bits before and assembled a decent economy. The people know we can do it again.

Fianna Fáil and its supporters, including the Progressive Democrats and latterly the Green Party, and various so-called Independents, have brought us to a much worse position than we faced in 1992. However, we will meet that task also. It is now clear from all the talk of consensus in the past two weeks or so that only a change of Government can bring about the national momentum required to assist us to climb out of the economic hole the Government has cast us into.

Every Member of this House, including me, has been transfixed by the story of the miners' rescue in Chile, particularly in recent days. The story came to a happy conclusion last night, thank God. A joyous Chilean President spoke of national unity, common purpose and sheer combined determination to achieve what seemed impossible. That should be our example. However, the Chilean effort involved the people; so must ours. The people must be consulted and decide. They will not tolerate any political ready-up by any parties in this House, particularly not one that maintained at its core discredited politicians who have brought us to this sorry pass.

The first aspect of our agenda concerns next year's budget, the second is the budget strategy for the next four years, the third component will be a strategy for jobs, and the fourth will be a strategy for reform. I want to mention the Labour Party's attitude to each of these elements.

With regard to the budget ahead, we said we accepted the need for cutbacks of €3 billion next year. We will publish our pre-budget statement, as we did last year, outlining how we would achieve that. It is not rocket science in that there are three components, as always. First is the issue of capital expenditure, second is the issue of current expenditure and third is the issue of taxation. Between those three elements, we will determine to find the €3 billion. Irrespective of whether that figure has now changed, as has been hinted by some Ministers, or whether it is €4.3 billion, as blurted by the Minister for Social Protection, Deputy Éamon Ó Cuív, we clearly need to see the figures. We understand that is now, finally, to be done.

The Labour Party will meet the task and set out its strategy. With regard to the four-year strategy, it will set out where we should go. Equally important are the other two elements I mentioned, namely, a strategy for reform and a strategy for jobs. I do not have time to address them in detail. We have laid out reams of policy documents on these matters over the past two years, many of which documents have been alluded to by other Labour Party speakers this morning, including Deputy Jan O'Sullivan and Deputy Brian O'Shea.

We talked about our graduate placement programmes, our strategic investment bank proposal and our loan guarantee scheme. All these elements and more will be required to achieve the most important objective, namely, jobs for our people.

The reform agenda will be broad and we will spell it out. It will include reform of the Oireachtas itself and its functions, as alluded to at the beginning of my speech. Thus, we will not be talking aimlessly at people who have already written their responses. I desire an Oireachtas that is in command, that holds people to account and where people are required to respond in a sensible and open way.

Other aspects of the strategy for reform need to be addressed. I do not have time to allude to them all. One element is the public service itself, which has fallen down on the job in this regard, as other speakers indicated. Also to be considered is the regulation system, which goes well beyond the Central Bank, the Department of Finance and Financial Regulator in that it concerns the accounting organisations, the auditing organisations. We must have fundamental reform of all those in order to restore confidence among the Irish people and those others on whom we depend for support.

The Labour Party will spell out its views on all these critical matters. All parties have a window of opportunity between now and early next year, during which time this nation will not be going to the bond markets looking for additional capital, to lay out before the people their programmes for growth and development and their fiscal, taxation and reform measures. It is on this basis that a new Government with a long-term fresh mandate can begin the slow climb to progress that the people demand and provide the leadership and hope they require.

Dáil Éireann debate - Thursday, 14 Oct 2010

Announcement by Minister for Finance on Banking of 30 September 2010: Statements (Resumed)

Dáil Éireann debate -
Thursday, 14 Oct 2010